The market for “Craft Beer”, “Real Ale” or whatever you want to call it, seems to continue to thrive and grow;
- New breweries continue to open every month around the country
- UK breweries in general have big expansion plans from the big names Chapel Down, BrewDog, Cloudwater to the recent crowdfunding of up-and-comers such as Hopstuff, and Bedlam.
- In addition, the big international players are pushing into the market to protect their position by launching their own version of “Craft Beer” using brands from their stables from other countries (Goose Island) or from smaller UK breweries they have purchased or created (Meantime).
In various discussions with breweries over the last three months and reading blogs and other published material it is quite clear that most dynamic breweries both large & small, have big plans for expansion in 2017/2018
If one analyses the plans discussed based on current sales and the projected sales, they tend to split into 3 groups.
1. Smaller Breweries driving as fast as possible for the magic £1 Million which keeps them just in the Small Breweries Beer Duty scheme.
2. Those who have passed the £1M level and whose duty rate is increasing, need to break the £2M barrier and beyond to get the benefit of scale to offset the increased duty.
3. Lastly the big players who are now moving to be national/international, larger scale enterprises with a requirement to grow possibly in a more structured way, but still add significant double digit growth each year.
The interesting aspect is that those breweries we talk to do not see any issue with moving from £150k sales after 1 year, to £500k the next year and £1 M the following year or from £600k to £1.5M in 18 months They point to companies such as Cloud Water who did £500k year 1 and have a target of £2.5M in year 3!
It shows clearly that for a range of breweries a growth rate of 100% to 200% per annum is not seen as an issue.
So the good news for breweries is that the market for “Great” beer, “Craft” beer, “Real” Beer shows no sign of dissipating, but is one of real growth where dramatic increases in sales are being achieved in breweries all around the country. So we have a very buoyant and dynamic market place that currently sees no limit to the amount of product that it can absorb and has created great opportunities for breweries that want to achieve significant sales growth.
This growth is great – it is the GOOD NEWS in the story, so what’s the potential BAD NEWS?
The BAD NEWS is that when markets grow like this, as a player in the market it forces you to do something.
Have to grow with the growth in the market place and keep your position in the brewery hierarchy
You have to protect your position for when the growth slows down and the bigger breweries come looking for business in your territory.
GROWING is easy in a buoyant market if you have the following in place;
- Clear articulated vision of where you want to be in 2-3 year’s time. Without this a lot of time, money and resource is wasted on activities that do not generate the right result and you can get lost along the way!
- Funds and equipment to enable you to produce the beer, to drive the growth
- Funds to enable you to cover the cash flow issues – adding £40,000 a month in sales generally means adding £60,000 extra in debtors!
- A Management team/structure to handle the growth.
- A brand that moves out from being local to becoming regional and national.
NOT GROWING, staying put or simple organic growth is good and acceptable but also needs to have certain criteria applied and, by the way, it is not really an easier option;
- Once again a defined articulated vision that clearly states that the aim is of simple organic growth
- A focus on cost efficiency to ensure you are as lean and efficient as possible, in order to ensure financially you are sound & have a financial cushion.
- Clarity on your product range, if you produce standard product, a larger player can always produce it cheaper. Your range needs to be focussed and precisely what your chosen market desires, requires and is willing to pay for, at a profit.
- A focus on your distribution. You have to know, manage and develop your relationship with your distribution such that it becomes a key strength and can protect you against incursions by competitive brands.
Either is acceptable in a growing market place. But if you currently have a plan to grow and your growth rate is significantly lower than the % indicated in the chart above, then in fact you are not growing fast enough in this market and you will find your peer group overtaking you.
If you want to get more clarity on your Brewery Growth Plan for 2017, then why not speak to one of our advisors at The Business of Drinks. We can help you assess your opportunities, match them to your ambitions and help you create a business roadmap that will guide you to your desired position.
The Business of Drinks works with breweries and other drinks companies across the UK. Business owners who use our services find they are more focussed, have a clearer vision of where they want to get to and achieve more.